6 Aug 2010 – As I begin this week’s commentary, I think to myself “does it make sense to write the same thing week after week?” I feel that I risk becoming like Ben Stein in Ferris Bueller’s Day Off droning on to a disinterested audience, but, then again, this continued low rate environment offers a wealth of opportunity for those embarking on a transaction. So, without further ado, we have officially hit another low point with Freddie Mac reporting that rates have reached the lowest point since they began tracking rates.
What is Keeping Mortgage Rates Low and Will it Continue?
The source of this extended low mortgage rate environment is the continued demand for seemingly safe investments like Treasuries as opposed the riskier stocks. This increased demand makes mortgaged back securities, which are bundles of mortgages bought and sold by investors, a very desirable investment. In short, investors are still exceedingly cautious and are unwilling to risk losing money. They still want to earn some gain on their assets, but not at the expense of a major loss. While there have been glimmers of hope, nothing has been encouraging enough to bring money en masse into stocks. This could change, but conventional wisdom is against it.
Should I Lock My Mortgage Rate?
I am recommending my clients lock in the short-term as the risk definitely outweighs the potential of securing a better rate. Greed in this situation could bite you in the rear if we see any type of stock rally. Fifteen or more days out, however, I do see some benefit in vigilant floating. For rate watchers, the official employment numbers come out tomorrow, which will likely have some influence in the mortgage market.Email This Post To a Friend.